How to Consolidate Debt in Canada

Consolidating debt in Canada is similar to doing it in the United States or elsewhere, although Canadians have some resources to turn to that are unique to Canada. Utilizing a consumer credit counseling organization is a popular way to help organize and repay your debt, but certain steps should be followed to find an organization that is trustworthy.

Instructions

1

Repaying your debt is about preparation and full disclosure. Pull your credit reports from the three major credit reporting agencies--Experian, Transunion and Equifax--to confirm what financial responsibilities you have. All three credit reporting agencies are available in Canada. You can obtain these credit reports for a small fee. Or, if you apply for credit, you're eligible to get a free copy of your report. This also ensures that you're made aware of all your credit accounts, paid or open.

2

Go online and visit Consolidated Credit Counseling Services of Canada (find a link in the References section below). This is a non-profit debt management agency and a registered charity, as opposed to a commercial debt management company that may charge fees or benefit in some other way from your debt repayment.

3

Set up a phone or personal appointment with the debt agency. Whether you go with Consolidated Credit Counseling or with some other service, you will need to bring your income records, such as recent tax returns and pay stubs, and debt listings, either from statements or from your credit report. A debt counselor will attempt to create a consolidated repayment plan, which essentially puts most or all of your debts together into one package to be serviced by a single monthly payment. If all goes well, the single payment will be one that you can afford.

4

Wait for the debt consolidation agency to submit a proposal for repayment to your creditors. The agency will make offers to each creditor. If the creditors accept these payment offers, then you'll benefit from paying a lower interest rate and possibly a lower payment in the long run. The agency will provide you a schedule of due dates and a statement. This statement will include your debts and relative balances. You'll send your payments directly to the consolidation agency, who then allocates payments to your creditors. Make timely payments--if you regularly miss payments, you may be removed from the program.

5

If you are credit-worthy and debt consolidation programs aren't for you, consider asking a lending agency for a consolidation loan. As with debt manager programs, get prepared by researching your credit reports and understand the scope of your financial responsibilities. Be ready to prove your income capacity as it's a key component of the loan process.

6

Shop around for good interest rates. Many Canadian banks and lending institutions can be found through online listings, such as http://www.bankingcanada.net/, or in the phone book. Compare rates and payment terms before applying. Your loan could vary from paying weekly, bi-weekly or monthly. Loan rates may be variable or fixed over the time of the loan. Some banks offer an opportunity to skip the equivalent of a payment once per year.

7

Apply for your consolidation loan. Once approved, you'll use the new loan to pay off your old credit card balances and other debts, consolidating them into one loan with one payment. If possible, pay a little extra every month to pay your debt off at a quicker rate.

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Can a Credit Card Company Levy a Lien Against Your Home?

Refusing to pay credit card debt can open you up to consequences like wage garnishment and credit score damage. In some cases, it could even result in a lien on your property. When this happens, you must repay the debt to have the lien removed. Otherwise, you will have to pay the creditor before you sell the property.

Credit Card Debt Collections

Although it is possible for credit card companies to file a lien on your property, it will definitely not be the first step in the process. When you miss your payment, the credit card company will contact you. After several missed payments and no response from you, the credit card company will charge the debt off and turn the account over to its internal collections department. The collections department will call you and send letters to collect.

Getting a Judgment

If the collections department is unsuccessful in collecting the credit card debt from you, the process then may move to civil court. The credit card company files a lawsuit against you. You will then be asked to appear in court. At the hearing, the credit card company will provide proof of the debt and the court will usually issue a judgment against you. If you do not show up to court, the judge will issue a default judgment against you.

Using the Judgment

Once the credit card company has a judgment against you, it can use that judgment in several ways to try to collect the debt from you. One of the ways is to file a lien against you. However, credit card companies do not always use this option. In many cases, the company will set up a payment plan with you. In other situations, it may pursue a wage garnishment against you.

Property Lien

If the credit card company chooses to put a lien on your house, it means that you will have to pay the debt if you want to sell the house. To get the lien removed, you also have to pay the debt. While some state laws do make it possible to force a foreclosure after a certain amount of time, this credit card companies rarely pursue this.

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Questions to Ask Collection Agencies

When a collection agency comes calling, it's important to be armed with an education about how collection agencies work and what rights you have. A collection agency may even have the wrong person. Just because you have a debt doesn't mean that a collection agency is correctly calling you about the debt it is investigating. It's important to get all the facts. Often, collection agencies are in a hurry. but don't let them fool you. Take your time to deal with the situation correctly.

Collection Agency Limits

Before you get too concerned, it's important to understand what a collection agency can and cannot do legally. If you owe a debt, it is your legally responsibility to pay the bill. However, credit agencies cannot threaten you. They cannot let your friends, boss or neighbors know that they are collecting a debt from you. That cannot take your money or confiscate assets or your paycheck to collect the debt. The government can take your check, though, and the bank can repossess your car on a car loan. A collection agency can and most likely will report your debt to the major credit bureaus, hurting your credit report. A company you owe a debt to can also take you to court.

Questions

Find out everything you can from a collection agency without giving any additional information on your part. Verify who the agency is are calling for and have the agency verify your Social Security information. Find out who the debt originates from and who owns the debt. Find out the full amount of the debt and any qualified legal fees. Ask the company to send proof of the debt. You have the right to dispute the debt and that will slow the process and make the collection agency verify the debt in writing.

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Pennsylvania Credit Card Default Consequences

Defaulting on a credit card balance is serious business no matter where you live. By defaulting on your account, you will harm your credit, have to deal with debt collectors and may even have to face a lawsuit. If you live in Pennsylvania and cannot pay your bills, you should be aware that Pennsylvania law protects you against both abusive collection tactics and wage garnishment if you are sued.

Credit Reporting

There are no special protections for Pennsylvania residents when it comes to credit reporting. If you are late or default on your credit card payments, your credit report will take a significant hit. At the same time, you are protected under the federal Fair Credit Reporting Act, which requires credit bureaus to investigate untrue information on your report and remove what it, or a creditor, cannot verify. The federal law also limits the length of time that most negative information can remain on your report to seven years, or ten years for bankruptcy.

Collection Efforts

While collection agencies have the right to try and persuade you to pay your debt, they do not have the right to use illegal or abusive tactics. Both the federal Fair Debt Collection Practices Act and Pennsylvania's Fair Credit Extension Uniformity Act forbid bill collectors from calling you in the middle of the night, at work (if they have been told that your employer does not permit them to call you there), or if the bill collector is informed that you are represented by a lawyer. In addition, it is against the law for the collector to make threats that it cannot, or will not, follow up on. For example, there are no debtor's prisons in America, and people don't go to jail for not paying a credit card bill. If a bill collector threatens you with jail time, he has violated both state and federal law.

Lawsuits

While a credit card company or collection agency can file a lawsuit against you in Pennsylvania, it must do so within the time period allowed by the statute of limitations. In Pennsylvania, the current statue of limitations in 2010 on filing a lawsuit to collect a debt is four years. If a creditor does file a lawsuit against you after that period of time, you can ask the judge to have the lawsuit dismissed on the grounds that it is out of statute.

Pennsylvania state law does not permit creditors to garnish your wages. If your creditor does win a lawsuit against you, it will need to find other ways to collect what you owe.

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What Is Non-Tax Debt?

There is no shortage of ways to get into debt, but the cost and process of paying off what you owe varies based on what type of debt you have. Taxes, which you incur simply by earning money, represent just one specific type of debt. Non-tax debt comprises all other types of debt, though it sometimes refers specifically to government debt.

General Definition

The general definition of non-tax debt is any money you legally owe that is not to a government taxation agency. This means that everything from credit cards and medical bills to student loans, auto loans, mortgages and fines are all types of non-tax debt. Non-tax debt comprises a much larger portion of what most people owe than tax debt, especially since tax debt is lessened by paycheck deductions and due every year, allowing taxpayers to start incurring new tax debt again without carrying over past tax debt in most cases.

Specific Uses

In some more specific cases, the term non-tax debt refers to any money an individual or business owes the federal government that it does not owe to the Internal Revenue Service as taxes or tax-related fees. This usage of non-tax debt includes only certain types of loans and fines, including direct student loans and federal fines imposed on individuals and corporations for violating laws or industry regulations.

Financial Management Service

The Financial Management Service is a branch of the United States Treasury that deals with non-tax government debt. Rather than requiring the Internal Revenue Service to collect other money that people owe the government, the federal government began this service back in 1940. The Financial Management Service also makes payments on behalf of the federal government, including Social Security benefits. If you owe the government non-tax money, you generally pay the Financial Management Service.

Significance

Besides knowing who to send your loan payments to, there are several cases where it's important to distinguish between non-tax debt and other forms of debt. For example, in a personal bankruptcy case, the court can only dismiss certain types of debt. Some non-tax debt, such as student loans, are exempt from being discharged. Non-tax debts that fall under the general definition, such as credit card debt and a mortgage loan, are eligible for reorganization or discharge. Different types of debt may also weigh differently on a business's credit rating or its financial evaluation by investors.

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Help for Drowning in Debt

Drowning in debt can hinder your sleep and create anxiety, which can trigger physical symptoms such as stomach pains, depression and tension headaches. Rather than let debt control you, learn to handle your debts and pay off balances faster.

Budgets

Spending money on extras each month takes a chunk of your money and leaves little left over for debt payments. Create a budget at the beginning of each month. Write out your monthly required expenses, including minimum debt payments, and exclude unnecessary expenses such as entertainment, dining out and shopping. Allot a certain amount of money each month to grocery shopping, transportation, housing and utilities. Stay within the budget. Use whatever you have in disposable income to pay down high debts before you spend any of that money on other items. Let's say you owe $10,000 in credit card debt. You could pay it off in two years with $400 monthly payments.

Interest Rates

The interest rate on your credit card plays a role in debt elimination. It doesn't hurt to contact your creditors and negotiate a lower rate on your credit cards. This works to your advantage in two ways. First, lower interest rates reduce interest charges and minimum payments. Second, paying less interest means that your creditor will apply more of your payments to the principal balance. Often simply asking for a better rate results in one.

Debt Settlement

Creditors vary, however; some are eager to work with debtors to reach a debt settlement. If high debts prevent you from making monthly payments, rather than lose money completely, your creditor may forgive a percentage of your debt and accept a smaller payoff. Call your creditor to negotiate a settlement. Get everything in writing once you've reached an agreement with your creditor.

Debt Counselors

Overwhelming debt can be too much for you to handle alone. A debt counseling agencies will assist you in getting out of debt faster. Counselors provide numerous services, such as speaking with your creditors for you and working out a new repayment plan, which often involves lower interest rates and minimum payments. Nonprofit debt counseling agencies do not charge a monthly fee.

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Statute of Limitations for Medical Debt

A medical debt, like other debts, is limited by state statutes of limitations. What statute of limitations applies to your medical debt can differ based on various factors, some of which require the expertise of an experienced attorney to determine. Talk to a lawyer in your area if you need legal advice about medical debts.

Limitations

A statute of limitations is a legal time limit. It states that a party has a limited amount of time in which to take a specific action. When it comes to medical debts, statutes of limitations limit the time in which a medical creditor, such as a physician or health care provider, has to sue a debtor for an unpaid medical debt. There are four kinds of debts that state statutes of limitations address: open accounts, promissory notes, written contracts and oral contracts.

Medical Debts

Medical debts are usually incurred after a patient has received treatment from a health care provider and signed a written agreement with the provider. If, however, the patient did not enter into a written agreement with the provider, the medical debt might be considered an oral agreement. This distinction is important as the statute of limitations that applies may differ based on whether the agreement is an oral agreement or written contract.

State Differences

Each state has its own statutes limiting when a creditor can sue a debtor to recover an unpaid debt. For example, as of April 2011, the state of Alaska has a statute of limitations that imposes a six-year limit on all types of debt. The state of Louisiana, on the other hand, imposes a 10-year limit on all kinds of debts except open accounts, which is subject to a three-year limit.

Affirmative Defense

Even if the statute of limitations on debt has expired, that doesn't mean a health care provider to whom you owe a debt cannot sue you. You can still be sued for failure to repay a medical debt and will have to go to court or file a response before you can avoid the debt because of the statute of limitations. The statutes of limitations afford a debtor an affirmative defense, meaning the debtor has to respond to any lawsuit and prove that the time limit has expired.

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